The online GST proposal

The Government has published a discussion document about what to do with GST on online purchases. It is here. They key points are:

Offshore suppliers will be required to register and return GST if their supplies of services to New Zealand-resident consumers exceed a given threshold in a 12-month period. Submissions are sought on the value of that threshold.

In some situations, an electronic marketplace or intermediary may be required to register instead of the principal offshore supplier.

The Government has kicked for touch (for now) the most politically significant issue of the de minimis threshold of $60 GST/fees (or $400 of goods) for collecting GST at the border. That is the issue I am more interested in. If Customs starts seizing my books from Amazon, I’ll be bloody pissed off.

What is proposed in the discussion document is pretty unobjectionable, but that is because they may be unenforceable.

Basically it is saying we’re going to ask overseas e-tailers to agree to register for GST in NZ, and pay us GST.

Some may do so, for reputational reasons. But what if they don’t?

These companies may not have a legal presence in NZ. Will Amazon be banned if they don’t agree to register for and collect GST?

So I’m not sure this will achieve much. It may get some voluntary compliance for reputational reasons, but not too many businesses will rush to pay a voluntary tax. If all OECD Governments agree to pass laws mandating each other’s GST laws must be honoured by their own businesses, then it would be a different matter.

So as I said the big issue for me is the de minimis threshold. There may be a case to reduce it a bit, but if the cost of collecting GST at the border is more than the revenue from it, then the threshold is too low.

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Comments (54)

Jack5

GST was a good idea if it was kept at a modest 10 per cent and if, and only if, it did not increase the total tax take. Unfortunately, internet purchasing has made it clumsy and flawed. It’s obsolescent.

For our small, spread- out population in one of the world’s most remote countries internet retailing is great. Perhaps it’s time to rethink GST. Is it viable in the internet age? If it can’t be imposed on foreign purchases, scrap it and find a replacement tax.

I would plump for a proper capital gains tax in place of the shadow CGT we have on share trading that relies on intent. Countries such as those in Scandinavia are reshaping capital gains taxes to protect small business owners (and farmers) who reap most of their gain from selling out at the end of their working lives. Perhaps we could similarly tailor death duties, the most cost-effective capital gains tax of all, so that they don’t crush ownership transition of family farms and businesses.

Put it to the voters: GST or capital gains tax?

One point about the Government’s plan: How will it affect Open Source Software, where users are often invited to make donations? Will these be GST free?

peterwn

Simply do away with GST altogether. I suspect that tax evasion/ avoidance is less than in the past and any extra leakage in this area would probably be less than Government and business costs involved with collecting GST. It will also deal with left wing demands to exempt various items from GST.

Secondary measures that would be needed are:
1. Increase income tax to compensate for loss of revenue.
2. More tax incentives for savings/ investment (to offset tax increases in 1.). This could include ‘caged’ investments administered by the taxpayer which are not available to 65 years old.

Potential issues would be:
1. Retailers may not fully adjust prices downwards when GST is removed, it would require a period of competitive pressures to achieve this.
2. ‘In hand’ benefits would be reduced because of tax increases and there would be moaning about this even though the change would be designed as ‘neutral’ (benefits are taxable to allow for a mixture of benefits and other income where allowed eg National Superannuation although benefit rates are quoted on an after tax basis).
3. To retain the status quo tax rates would need to be a bit more ‘regressive’ (as left wingers call it) than at present ie lower end rates would be increased more than higher end rates.

I think the PM and Finance Minister should take a look at this (staffers please note).

themanwhowatches

The discussion document is mostly unobjectionable because it was written by policy wonks in Treasury, IRD with no doubt input by others such as DPMC. Once the politicians get involved, however, any credibility is shot. Rather than come out openly and admit to yet another tax grab, the politicians treat us with contempt with their defences of “level paying field”, “international practice”, “closing a loophole” yada yada yada. If “level playing field” was in any way true we would still be assembling motor vehicles and churning out Crown Lynn crockery under shelter of high tariffs. It is pure bull dust for any politician to argue that an additional 15% on digital downloads, of which there are few suppliers in NZ if any, levels any playing field and it is equally specious to argue that another 15% on physical goods will benefit local retailers in any significant way. The paper rightly points out that the draft OECD proposals relate to services and intangibles, and not to low value physical goods, but do we hear the politicians telling us that truth? And as for closing a loophole, that is a straight out untruth. The current system was set up to acknowledge that the cost of collection exceeded the revenue gained – not a loophole but a deliberate decision, as those of us who were involved at the time know full well. This is just another in National’s ever increasing line of tax grabs and the politicians involved have neither the honesty to acknowledge it nor suffucient respect for the voters to tell them the truth.

New Kiwi

alloytoo

Firstly this isn’t a new tax, it’s not even an extension of the existing tax, it’s merely an attempted closing of a loophole in respect of services originating offshore but supplied in New Zealand through a medium that did not exist when the original tax was promulgated.

Secondly the tax will have a once off effect on the service price and then (as history demonstrates) we will largely forget about it, basing our choices on the inclusive price.

I’m all in favour of paying 15% GST on imported goods (I suspect, as many others, that some prices will still be cheaper than local vendors), it’s the other obscene customs charges that I object to.

Fentex

Why? They presumably would do so in order to collect a tax we all pay within NZ. Why should that piss someone off? Especially someone who I expect believes consumption taxes are better than income taxes.

I’ve occasionally had phones calls from the IRD about packages held in the post until I pay GST on them – usually via credit card during those phone calls.

Personally I think the IRD ought be working on ways to minimise the expense of gathering GST. If they streamline procedures to simplify and reduce the expense of doing so the disparity diminishes without needing changes in law or ludicrous efforts to pretend foreign companies need register for NZ tax collection.

Given modern information technology I should think there’s a lot of opportunity to reduce costs in this regard and thus lower the threshold the IRD uses and reduce the avoidance of tax by importing.

Bullion

What I find interesting is how it may affect those circumnavigating geoblocks

The paper, released by Revenue Minister Todd McClay on Tuesday morning, spells out details of the Government’s plan to start collecting GST on the likes of Netflix and Spotify subscriptions, iTunes downloads and e-books.
Similar taxes, which are colloquially known as “Netflix taxes”, have been introduced by South Africa, Norway, South Korea and Switzerland, and are in the pipeline in Australia and Japan.

The tax would be collected automatically but consumers who managed to avoid paying GST on imported services, for example, by tricking suppliers into thinking they lived outside the country, could be fined up to $25,000.

Sonny Blount

In theory yes. When you get businesses to do all the collection and take liability for the collection free of charge then yes.

In practise in the modern world if govt paid the full cost of admin and collection and it didn’t require policing of billions of transactions each year then no.

In effect the GST for imported goods is about 30% and 2 weeks at the $400-$1000 level.

What this change in policing does is hampers NZ’s competitive businesses and rewards our inefficient ones.

If GST is not extracted from residents then we have a higher standard of living, higher productivity, and higher discretionary spending available.

If I buy my clothes, books, and electronics now at a higher price then it’s less money for me to spend locally on craft beer, Weta movies, restaurants, and online accounting software.

If NZers can now buy less then in the end all NZ businesses will lose. If $40 million of revenue is extracted from Kiwis then its $40 million less they have to spend, and that $40 million was more likely to go to NZ businesses than anywhere else.

ross411

Bullion (133 comments) says:
August 18th, 2015 at 1:51 pm
What I find interesting is how it may affect those circumnavigating geoblocks

The paper, released by Revenue Minister Todd McClay on Tuesday morning, spells out details of the Government’s plan to start collecting GST on the likes of Netflix and Spotify subscriptions, iTunes downloads and e-books.
Similar taxes, which are colloquially known as “Netflix taxes”, have been introduced by South Africa, Norway, South Korea and Switzerland, and are in the pipeline in Australia and Japan.

The tax would be collected automatically but consumers who managed to avoid paying GST on imported services, for example, by tricking suppliers into thinking they lived outside the country, could be fined up to $25,000.

That’s about what Phillip Taito Field was ordered to pay his slaves as compensation at the time of his bribery and perverting the course of justice charges. Who makes up these numbers? I’d like to see a web site listing them all putting them in perspective.

thedavincimode

alloytoo

Careful. You’re making way too much sense to participate on this thread. Leave it to the me-first socialist and Muldoonist envy-based tax proponents who have no idea what they are talking about despite the screeds posted here about these very sorts of tax issues in the past. Never mind that every utterance that I can recall from this Government in this context and on a number of other relatively minor issues has reflected a concern to ensure that collection costs are factored into these decisions. The entire issue boils down to these two essential propositions: 1) I don’t want to pay it; 2) someone else can pay (see proposition (1).

Further thought or analysis beyond these essential propositions is not required.

alloytoo

@ Sonny

Your primary objection to GST is that you want 15% more disposable income. That’s never going to happen, PAYE or other levies would be increased to full the shortfall (and probably at a far higher compliance cost), so much so that you’ll end up losing more than 15%.

@ Manolo – This is not a new tax, services provided inside NZ are subject to GST, this is merely a compliance issue.

alloytoo

artemisia

1. Loss of tax revenue on purchases under $400 (including shipping). Problem – how to set thresholds and processes so there is a net tax gain. Good luck with that.

2. Retailing lobby groups who feel hard done by if they are missing out on sales to overseas suppliers. Problem 1 – local retailers just don’t stock a lot of stuff available online, so how can they be missing out on sales. Most of what I buy online is specialist books not available here and never will be unless they are dropshipped. Problem 2 – as many others have pointed out, NZ retailers (some not all) are hiking up prices well beyond the directly shipped cost of the same item. And bear in mind they will usually be paying wholesale prices plus bulk shipping to the overseas supplier, whereas the consumer will be paying retail prices and non-bulk shipping.

But I think Mr Farrar put his finger right on it – can this government afford to piss off a large number of voters by nickel and diming them, especially as 2017 draws nearer.

Sonny Blount

alloytoo (720 comments) says:
August 18th, 2015 at 2:34 pm
@ Sonny

Your primary objection to GST is that you want 15% more disposable income. That’s never going to happen, PAYE or other levies would be increased to full the shortfall (and probably at a far higher compliance cost), so much so that you’ll end up losing more than 15%.

@ Manolo – This is not a new tax, services provided inside NZ are subject to GST, this is merely a compliance issue.

No it’s not.

To collect this tax costs far more than the supposed 15% for the consumer.

waripori

This all has to happen. It is either scrap GST altogether or find a way to collect it on all supplies regardless of where they come from. The GST free nature of purchases from offshore is already causing lots of distortions and it will only get worse.

I am a bit hazy about GST on the digital stuff. There are probably lots of ways around it and I would have thought this was the hard part of collecting GST on overseas supplied goods and services. The physical goods aspect sounds to me like it would be easier. I have thought for ages the banks should collect it on credit card transactions from offshore but I am told that is impractical. What is intended is to have offshore suppliers register for NZ GST. In the end I think that will be workable. Suppliers who are registered would get a way of marking packages to signify ( bar code or some other digital signature ) that they were registered and those packages could be scanned through and sent straight on to purchasers. Anything that comes from an unregistered supplier would be held up at customs and the purchaser would need to pay GST plus probably a handling fee to get their package. That would give IRD a package count at least for each supplier if not a value and they could compare this with a monthly return.

It would not be very long before most purchasers will only buy from registered suppliers. If it really is a matter of choice and the only source of something is not registered for NZ GST then the extra cost and inconvenience will need to be factored in by purchasers.

People complaining about the cost and inconvenience have conveniently forgotten that NZ retailers have to collect GST for the Government now and no one pays them to do it.

If this system was in place it would be possible to raise the threshold at which parcels can come in without customs clearance fees to say $1,000 for GST registered suppliers. That would actually be a benefit to NZ businesses as most of those larger purchases are probably for retailers or other businesses and it would speed up the supply of goods and reduce costs. That would be a quid pro quo which might make the reduction of the non taxable threshold to zero more palatable.

All those ebay suppliers might have to use some sort of aggregator to get their stuff through the green lane if they don’t want to register themselves.

themanwhowatches

I say it again, it is not a “loophole” being closed. The decision to set a threshold below which it was uneconomic to collect the revenue however the goods were ordered – back in the day from a mail order catalogue and more recently over the net – was quite deliberate. It is a fact that purchases can now be in a digital form not foreseen when GST was implemented. But nothing has changed in respect of physical goods, except the growth in demand for them. Calling this a loophole is wrong, as anybody who was working in this area when GST was introduced will know, and politicians dissembling the truth about the reasons why they are doing it is treating the public with contempt. As somebody said earlier in this thread, if revenue were not the issue then compensating reductions would be made elsewhere in the tax system.

Thanks, DPF, for posting this. Lots of opinions and emotions running on this one, but it’s good to see the actual document. I’ll now have to read it, but it’ll be nice to be informed. Lots of talking going on, so will be good for some actual details!

alloytoo

@ Sonny

I’m afraid you’ll find that GST is a very efficient tax it’s broad based consumer tax which is gaining popularity globally.

IRD deals with a relatively small number of vendors (compared to the overall number of tax payers in the country) and for an efficiently run vendor compliance costs are small (certainly far less than PAYE compliance costs).

It’s pragmatic to attempt to include digital vendors in the net because they’re generally large concerns who can afford compliance. (In fact it wouldn’t surprise me if the TPPA included some provisions for applying consumption taxes on these internet based multinationals based on where the service is consumed).

It’s not so practical to attempt to police every dollars worth of physical goods crossing our border.

New Kiwi

How come? Do you buy from Amazon UK? I don’t know anyone in NZ who is charged sales tax from Amazon for ebooks.

Yes, that is Amazon.co.uk – which does charge VAT. I will have to start looking at Amazon.com as well, but I have just checked and they didn’t have Kindle editions of the two most recent ebooks I bought from Amazon.co.uk.

As a publisher of an e-book currently distributed world wide I face the interesting situation that GST may be imposed from a purchase via iTunes, Amazon or others for download to here. That puts the sale on par with a NZ resident downloading it directly from our website. See our site here: http://lambtonpublishing.com/nzshop.html

From the beginning of this year the EU has required member states to collect VAT from the suppliers of downloads originating outside the EU. That is 27 countries and the rates are set by each and VAT is payable according from 15-27%. Other countries are starting to copy and some USA States are also believed to be also considering it.

The administration for Europe is not that difficult. They have a VATMOSS (VATMiniOneStopShop) where a supplier registers with the authorities in one EU country of their choice and files and pays there quarterly via credit card or possibly some other arrangement. There is software already available for e-commerce sites to handle this at the cart stage and see to compliance, record keeping and filing requirements. On our modest scale the price was only NZ 8cents/transaction and very simple to set up. All the online digital sellers face this. We have for the time being stopped selling directly to Europe but increased our prices so that we are generally OK after Amazon or others deduct the VAT they have to pay from their net residue.

Physical goods are more difficult and some international agreement may need to be reached in the future. Trade can’t be stopped and it may be global buyers will have to provide a tax number which can be processed electronically as goods come over the border if they wish to be exempted. Local merchants can properly feel aggrieved about the lack of a fair playing field but variability is built into the nature of business and adaptabilty into its success.

I saw on tonight’s news they’re going to whack a tax on electronic purchases such as Spotify (which will go up from $12.95 a month to $14.95 a month). This is not a discussion but has already been decided. I don’t see how they can do that when there’s no physical object. Damn annoying. It’s just an exercise in making tax money.

Sonny Blount

alloytoo (721 comments) says:
August 18th, 2015 at 3:38 pm
@ Sonny

I’m afraid you’ll find that GST is a very efficient tax it’s broad based consumer tax which is gaining popularity globally.

IRD deals with a relatively small number of vendors (compared to the overall number of tax payers in the country) and for an efficiently run vendor compliance costs are small (certainly far less than PAYE compliance costs).

It’s pragmatic to attempt to include digital vendors in the net because they’re generally large concerns who can afford compliance. (In fact it wouldn’t surprise me if the TPPA included some provisions for applying consumption taxes on these internet based multinationals based on where the service is consumed).

It’s not so practical to attempt to police every dollars worth of physical goods crossing our border.

Which is all irrelevant.

Tax take is x under current implementations of the laws.

Making this change will increase tax take to x+1, lowering the standard of living for all NZer’s and stunting economic growth ever so slightly.

But like you say, my real bug bear is the stopping of physical goods, where the charges for items around $400 work out to well over 30% and 2 weeks or so of time.

The global economy is moving to more and more specialised production and distribution. Stock of clothing and electronics does not need to be held on site in expensive real estate in every city around the world. Instead it can come from a few regional production sites and be delivered directly to the consumer as it is wanted. This is probably going to be efficient for everyone and will therefore create wealth for all.

The quantity of parcels coming into the country could increase by a huge factor and having a money bleeding, slow import process is like having insufficient logistics and IT infrastructure within the country. It will keep us at a competitive disadvantage.

NZ customs is the 52k router receiving goods from the ultrafast fibre of worldwide distribution and bleeding your wallet in the process.

ross411

Fletch (7,535 comments) says:
August 18th, 2015 at 6:32 pm
I notice they also want to charge Facebook. WTF??
And what if they don’t agree? Will the govt ban Facebook in New Zealand?

‘
That’s a very good point Fletch.

If they do not apply it consistently to all goods and services, and give some companies a pass because they can’t be forced to whereas others can, how legally fair is it? And even, for that matter, legal?

wreck1080

dc

Amazon are already collecting GST on your purchases over the $400 threshold, so it is trivial for them to lower it. So is eBay. If anything the price of buying expensive items from Amazon may go down if the government abolish the annoying $50 Import Entry Transaction Fee that they charge for collecting the GST on entry.

rightoverlabour

What I would like is someone to work out the true tax we are getting hit with. First there is PAYE, then GST, then petrol tax (plus GST, Alcohol duty (plus GST) etc etc. So we are taxed and then taxed on the tax…. If this goes through then I will be switching my vote to any party that promises reduced taxation. This is nothing more than a tax grab with nothing in return. Sick of working my whole life to be taxed to death….

Manolo

simo

Unintended consequence due to retailers having no competition is we will revert back to pre 1984 and the local retailers will run amok with their pricing – just look at Aussie and some of the ridiculous laws they have on importing foreign goods to protect the locals. The great leap backwards I reckon, not to mention the cost to collect and prosecute will be astronomical.

Meatloaf

I’ve noticed on this thread that some people don’t like GST, and think we should replace it with some other taxes, like capital gains or higher income tax. The simple reality is that the poor pay far less income tax than the middle class do. And the rich pay people to minimise their tax. For instance, in England my brother has set up a corporation. If the first 20,000 pounds per year is tax free my brother will only take out the 20,000 from his corporation, and only pay on that 20,000 pounds if 20,000 pounds will be enough. This means if he is making 30,000 pounds which goes to his company, he only pays tax on the 20,000 pounds that he takes out, the rest accumulates, and then when he retires he has all that money.

With income tax, with trusts, with corporations their will always be ways of finding loopholes. The very richest people pay less tax per dollar earnt than the middle class. Warren Buffett offered $1 million to any CEO who was paying more tax in proportion to their earnings than their secretary. Not one took up his offer.

So in essence income tax hits the middle class the hardest. Having said that, I see governments constantly finding new ways of getting more out of us. ACC has a $28 billion surplus, and that can be lent to the government. So I’m not saying this idea is a good idea, their is every possibility its just another tax, however GST itself is a better tax than other taxes.

Meatloaf

Rightoverlabour let me do some sort of estimate for you. The first $14,000 is taxed at about 12.5%, the next $26,000 or so is taxed at somewhere around 17.5% (the tax rates keep on changing so its just a rough estimate), then it goes much higher than that. So I would say the average tax payer pays 15% of their income as income tax.

So you’ve earnt a dollar, 15% of it is taxed, you have 85% left. Then you have to pay petrol tax, which is 90 cents per litre, rates directly or indirectly if you rent, then GST, and a higher rate of tax if on cigarettes or alcohol. So if you have 85 cents left after income tax, and then with GST another 15% is taken: 85% x (1-0.15) = 85% x 85% = 72%. So even if those were the only two taxes (income and GST), you only have 72% left. But with rates and petrol, and all these other taxes and charges, I could see that taking up another 30% easy. So what I’m saying is if the average worker kept half of their earnings, I would be very surprised. I expect that the average worker would keep less than half.

Anyhow that’s just a rough estimate, the department of statistics probably has got a much more accurate idea.

Jack5

New Zealand firms have to register for GST only if their annual turnover is over $60,000.

Should overseas firms have to register to collect GST for NZ sales if, and only if, they sell more than $60,000 a year to New Zealand? That would be fair, surely.

Also, if overseas firms pay for delivery and customs clearance, surely they will be able to offset the delivery and customs charges against GST collected and passed on to NZ.

How will the IRD audit overseas firms?

Also, what happens with secondhand goods? An accountant could help us by clarifying the position, but I suspect there is no GST on sale of secondhand goods unless they are claimed as input in calculating GST and are then exported – or are sold within NZ with GST added.

Just scrap GST and get the money from a capital gains tax. GST is incompatible with emerging international retail patterns. Our manufacturers are increasingly have long since been open to competition from abroad. Why not our retailers, too?

Meatloaf

Jack5, yes 2nd hand goods have no GST. Here’s why. Suppose I bought an Age of Empires and age of kings CD Rom package for $50, 20 years ago. I then decide that I want to resell it. Its not in its original packaging, so I’m not going to sell it for $50. Now suppose I sell it for $10. If their was GST on 2nd hand goods, I could say I paid GST on $50 ($50 x 12.5% = $6.25) , I’ve sold it for $10 ($10 x 15% = $1.50), and that would mean the IRD would get less money not more money. I would say I’ve received $10 on sales, but that $10 cost me $50 This is why the IRD also says if you earn money from a hobby, you don’t pay tax on it.

Suppose you make pottery as a craft. One day you sell something for $50, well you should pay tax on that $50 right? Well, if you have to pay on that $50, what about all the pottery classes that you went to, and all the money you’ve paid for materials. The reason the IRD has this no tax on hobbies, is cause your expenses will be greater than your income.

In regards to the technicality of enforcing a GST on overseas goods, the word we used to use was tariffs. A tariff is a tax on overseas imports. Customs can stop anything coming in. They would collect their tariff from the overseas seller, and the overseas seller passes it on. However, because tariffs are usually at a higher rate than domestic goods made, that is why they say GST on overseas goods, it means the same thing. However, with this whole digital stuff, this means they have to claim jurisdiction over the digital world, which is a scary thing. This means they have even more control over our lives.

That’s the best I can do in regards to your questions. Oh I forgot, when we had tariffs a tax on imports, we had no GST. We got rid of our tariffs, but collected GST instead, maybe not in the same year, but over time we made this change.

Jack5

Thank you Meatloaf (11.20).

GST on internet transmitted goods will be interesting. Open Software is free, but the providers typically invited a donation, so I guess it’s craft like.

But there are many fully commercial foreign internet firms that might sell $20,000 or less worth of products to NZ a year. I’m thinking of specialist applications for audio and so on. They might fit our craft classification.

Presumably audits could be through a corresponding country’s tax service, but to do that the American or Chinese or other tax service would have to require NZ sales be separated out in tax returns. No problem for Amazon or a big music or video seller, but there are heaps of other internet retailers New Zealanders deal with.

Meatloaf

Jack 5, in regards to your last post, in my terminology I would call that a one off wealth tax, or an inheritance tax. It would mean that the rich who know how to rort the system would actually get hit. But then, if the rate is very high here, the rich will just move overseas when they retire. Well actually if their wealth is in land, they can’t move that overseas. So I would say, if we were to implement if we’re not already, if you don’t make it too high it just might work.

And that’s the politician’s formula, many taxes at a low rate, get more revenue than one big tax. The bigger the tax the more people will avoid it. That’s why we have so many taxes.

Jack5

Meatloaf: I take your point that an inheritance tax might work if it were not too steep.

Perhaps GST might work better, too, if it had been held at 10 per cent.

To me, it’s a bit like the $9.99 and $99.60 price tickets in shops. They must work or the retailers wouldn’t use them.

If I only we had kept the easily calculated 10 per cent rate. It’s only since it’s risen twice, to 15 per cent, that I resent the possibility of it being applied on overseas goods.

Your point about politicians preferring many taxes at a low rate. Apart from stopping people from avoiding taxes, it diverts their attention from how much tax is taken. How many of us know the total national tax take and its trends. At the same time we are bombarded daily with messages each highlighting a “need” for more public spending.

Meatloaf

Jack5, in my tax class, we were taught the fine line of hobbies vs business. Their was a set of 7 tests. If you set up a shop and are paying rent, you definitely get classified as a business. For it to be a hobby it has to be for your own enjoyment, not paying any rent, and it has to be for your own fun as the big motive. We were taught that as soon as it makes a profit the IRD will try to persuade you that it is a business, and if its not making a profit they will try to persuade you it is a hobby. The list is by no means exhaustive, but I really seriously doubt those internet firms will qualify.

In regards to your other point, how it works, is if you reside in a country for more than 182 days in that year, you are a resident of that country, and get taxed on your world income. So if my world income is $100,000, and I live in NZ for 183 days or more I pay tax on the full $100,000. As part of the deal, any tax I’ve paid to America or China offsets my tax to New Zealand. So if I pay the US government $10,000 US dollars for my trade with them, that’s $10,000 less to the NZ government, actually no the equivalent of $10,000 US this is called a double tax agreement.

My dad, travels around the world so he has to do this all the time. And his pension is partly from America, and what he gets from America offsets his NZ pension. So it is a muddle, I understand, that’s accounting for you.

But yes GST on internet transmitted goods will be interesting, it means somehow they will need to get jurisdiction in that way, which means less privacy.

Meatloaf

Jack5, this might be hard to believe, but some economists calculate 75% to 80% of a UK citizens’s income is taxed when everything is included. I myself have trouble believing that, but that could be because I have a simple and frugal life. If it were 60% that’s very believable.

A GST on 10% is actually practical, it might mean adjusting something else (like less working for families), but it actually is fair. In the USA for instance, every single State’s sales tax is 10% or less. 10% is also easy to calculate. And if we had less tax, maybe people could take care of themselves with less spending by the government.

Meatloaf

Jack5, the first account’s client I had was a friend who was a piano instructor. He would truck drive in the morning (his normal job), and he would teach classes in the afternoon and evening to school children. According to the IRD’s booklet 10 years ago, if sales are more than $250 for the year, you must file a return. And for years, his sales would have been well below $10,000, cause at most he had 12 students. So what we’ve always been taught in accounting, is $60,000 is the GST point. If your sales are definitely less than $60,000 no GST on sales is required. But you pay on your profit even if is only a small amount, unless it meets the eligibility of a hobby.

Their’s another category called self employment income and home based business. You get taxed based on your profit, even if what you are making is very small.

Anyhow goodnight Jack5, feel free to comment tomorrow morning if you so desire. And I have enjoyed chatting with you Jack5.

Jack5

Good morning Meatloaf. I’ve just had a glance at the IRD web site, and this is their specification for those suppliers who must register for GST:

You must register for GST if you carry out a taxable activity and if your turnover:

– was over $60,000 for the last 12 months, or

– is expected to go over $60,000 for the next 12 months
(This equates to $5,000 per month. If your turnover is $5,000 per month and you expect to maintain that level all year, you’ll need to register for GST.), or

– was less than $60,000, but you include GST in your prices, for example taxi drivers who have included 15% in their taxi fares.

Based on this, should overseas suppliers who sell less than NZD60,000 worth of goods or services to New Zealand in a year have to collect GST for New Zealand?

deadrightkev

Who does a GST serve? ONLY THE GOVERNMENT and noncompetitive RETAILERS who also have the option of purchasing the same product from offshore in bulk and they normally do.

A GST will add cost onto retailer stock price as well then they sell it then they add more GST. Again the government gets more to waste.

It will simply add more cost to the price of product for Kiwis which is negative and plainly fucken dumb. It will add a layer of bureaucracy which we need like a hole in the head.

It is a blunt collection and distribution cycle mechanism to keep government spending on the up the same as any other impost on the people of this country.

You are stupid fools or hopelessly empathetic if you think more GST is fair or just for NZ.

If National was doing this as a segment of a wider tax reform eliminating company tax while introducing a flat tax on incomes then I would think differently. National is in capable and frightened of real tax reform.

Meatloaf

First of all to Deadrightkev, on this string one of the first things I said at 10:29 pm, is that the government constantly finds new ways of collecting tax, and this could very well be the case, however almost the rest of what I’ve said has to do with the fact that the rich pay very little tax, cause they know how to minimise and they have experts to do that, and the poor can’t be taxed much on their income cause they have so little, therefore the middle class pay the majority, so therefore GST is actually the fairest form of tax, and actually this GST on imports can simply be called a tariff tax. So I’m not advocating more tax, just simply pointing out that GST is not as bad as other taxes, and that has been the debate between Jack5 and I.

Now Jack5, sorry for the late reply, so first of all I pick up that if your invoices have GST, you must pay GST even if your sales are below $60,000, so yes that’s correct, if your customers can get GST deductions, then you must pay for the GST, but in the case of taxi drivers your customers won’t claim the deduction so their is no gain for them.

Now in regards to your last sentence, imports of goods is neither in the zero rated or exempt categories of GST. So imports are neither exempt or zero rated, this means that when they get imported into New Zealand, the seller of those imports must pay GST. Now if you look at the very top of this thread, it talks about GST on services, and GST on digital goods like kindles. So this means yes we are paying GST on imported goods, however, they haven’t enforced a collection on services or digital goods like ebooks.

So, although I’m not entirely sure as to the threshold for an overseas importer, it would be fair if the threshold were $60,000, however I think it is reasonably likely that no matter who sells it to New Zealand, they get hit with GST. Those who export from overseas are bound by the rules of their country.

Having said this, DPF has talked about a threshold being enforced, and when we look at all the bureaucracy, it is important that a threshold is maintained otherwise it is pure waste.

Finally Kev, I have learnt more about Colin, and have changed my stance, as compared to last time we blogged about this. I’ve never voted for him, cause I didn’t expect him to get 5%, nor do I think he will next time, but I have heard his side of the story.